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LM-9.3.1

The stress testing results must be linked to the overall liquidity risk management process of a bank, including the setting of the liquidity risk tolerance and the internal liquidity risk limits). To this end, senior management must:

(a) Ensure proper documentation of the stress scenarios and related assumptions, and review the scenarios and assumptions periodically;
(b) Evaluate the stress testing results and consider any possible need for remedial or mitigating actions. Remedial or mitigating actions may include actions to limit the bank's liquidity risk exposures, obtain more long-term funding, restructure the composition of assets, and increase the size of the bank's liquidity cushion or the adoption of any other measures to adjust the bank's liquidity profile to fit its risk tolerance. Where such actions are not considered necessary to address stress test results indicating potential liquidity strains or shortfalls, senior management must document the justifications for their view;
(c) Report the stress testing results and vulnerabilities identified to the Board (or its relevant delegated committee(s)), with recommendations for any resulting actions. Where appropriate, the CBB must be informed of the results and anticipated actions if they are material to the bank (i.e. in addition to normal stress testing reporting arrangements); and
(d) Integrate the stress-testing results into the bank's strategic business planning and Contingency Funding Plan ('CFP').
August 2018